Industry Knowledge Community Committed to having Ongoing Impact on Carrier Commerce and thus Financial Inclusion

A rather quiet alternative payment solution is continuing its inexorable ascension in depth and now breadth as a major, impactful payment solution globally.

Direct Carrier Billing [DCB], also referred to as Direct Operator Billing, had its beginnings back near the dawn of monetizing the Internet. Visionaries of eCommerce saw the potential for transacting online, plus anticipated new forms of digital products but at price points far below viable economic model thresholds of traditional payments options like credit cards. The notion of micropayments caused eCommerce planners to intuitively look to telco/carriers to overcome this challenge. While carriers are communication network companies, their other significant core competency was billing. Specifically carriers supported line item billing of network call events that often represented charges to customers in amounts comparable to microbilling (less than $5.00, even less than $1.00).

​In the US, while credit card penetration was significant, industry studies showed sizable portions of the population on the sidelines of eCommerce (20-40%+) due to either being unbanked or fearing to transact online with one’s personal financial account information. Leadership at major merchants viewed direct carrier billing as the Holy Grail of eCommerce billing but in the US, carrier leadership was under significant financial pressure due to chasing the fraudulent MCI/Worldcom ghost, and cramming and slamming billing complaints to the FTC, FCC then to Carrier C-suites (for unauthorized switching of long distance carrier). These environmental factors influenced thinking at leadership of US carriers to not aggressively pursue direct carrier billing.

Over time, while the US became generally viewed as a global laggard with DCB, globally hundreds of carriers, thousands of merchants and countless millions of consumers scaled utilizing DCB to make purchases of a potpourri of premium digital content goods and services. In 2016, DCB has expanded its global reach to be available in about 120 countries (representing over 90% of the world’s population), supported by 1-10+ carriers per country. Leading industry analyst firms approximate the DCB globally supports $12-$16B+ now, projected to grow to over $24B by 2019.

What are some of the reasons for DCB’s acceptance and successes globally? 1) Incremental revenues: Even in the US, merchants utilizing DCB were able to realize a 10%-30% lift in revenues by adding this payment option. 2) The revenue lift in US was realized because larger addressable markets were reached. a. The unbanked (poor, rural, teens, etc.) b. Those concerned about having their credit card or bank account info hacked. 3) The near ubiquitous billing reach of carriers. 4) A vastly superior conversion rate of DCB over credit card and other payment options (touted by some DCB providers to be as much as 5 times higher).

Fundamentally there has been a logical progression of DCB derived in large part to a complex array of environmental factors per nation spanning regulatory climate, penetration rates of traditional payment methods, taxes, priorities of carrier leadership, carrier margins, etc. Generally speaking, DCB’s initial progression evolved from microtransactions thresholds, upmarket to higher price points as online merchants scaled the array of premium digital goods. First-movers continued to pioneer with DCB, next expanding into forms of non-digital services.

DCB continued to meet or exceed key measures (incremental revenues, risk management, etc.). Specifically, Docomo Digital shared that in both Japan and Europe, the superior conversion rate of DCB and the possibility of DCB addressing new customers (even in countries with strong credit card penetration), continues to be realized by merchants. Further, some carriers began to discover that they can realize a goodwill windfall from helping to bring financially excluded populations into the digital economy via DCB, as well as other ‘Carrier Commerce’ offerings such as mobile money and much more. In recent years, pioneering Carriers and their partners have continued to successfully advance how DCB helps merchants and consumers by demonstrating again DCB’s effectiveness as a billing option – now for ‘soft-physical’ goods like ticketing (i.e.: commuting/transportation via taxi, ferry, train, ferry, (etc.); sporting events and more). The benchmarks for incremental revenues, larger addressable markets, higher conversion rates, as well as stickier customers and goodwill windfalls again were achieved. ​

​A majority of FinTech Payment Industry coverage focuses on marquee companies (Apple, Google, Samsung, etc.) as they strive to advance Mobile Payments/proximity payments. While specifics are proprietary, one important indication of marketplace feedback comes from Vodafone which has the flagship Carrier operated mobile money service: M-Pesa. In contrast to the attention garnered by proximity payments, a significant majority of M-Pesa transactions are remote as opposed to proximity, reinforcing the notion that DCB’s focus dovetails with consumer/marketplace needs.

During a late May 2016 webinar by Ovum, DCB was stated to have achieved $16.6B in 2015, projected to climb to $25.3B by 2020. Clearly $16.6B is huge, yet viewed through the lens of Carriers which had aggregate revenues of $1.02T in 2015, DCB was less than 2% of the Carrier industry’s 2015 total. That said, there is growing appreciation in increasing numbers of Carrier C-suites that M-Commerce revenue is projected to be $1.3T by 2020, overtaking aggregate global carrier revenues in just a few years. The incremental revenue opportunities from M-Commerce via Carrier billing assets can be huge.

advance financial inclusion – a differentiated strength of DCB as its purpose since the beginning was to reach the unbanked. 2) A new twist for those familiar with carrier economic models because it involves margin advantages. Carriers have established a reputation for charging a premium for DCB. Merchants decide whether the

incremental business via DCB was worth DCB’s premium (lower margin to merchant). As a variety of environmental factors have evolved over time, a trend is emerging with carriers becoming more

competitive with their margins, and in some markets the DCB margin is providing a better margin compared to certain alternative payment options.

What does the recent and current global landscape look like for DCB-physical? There are several supplier-partners to carriers which enable DCB including ARPUPLUS/T-Pay, Bango, Boku, Centilli/infobip, Danal, DIMOCO, Docomo Digital, Fortumo, Mobile Embrace, SLA Mobile and others. In the ~12-18 months before 2016 began, examples of DCB-physical trials included: - Singapore: Singtel, Fortumo and Rovio partnered to support DCB-physical of Angry Bird toys - Spain: Docomo Digital and three main carriers: Orange, Telefonica & Vodafone, have for over a year successfully helped National express (ALSA in Spain) have their riders pay

with DCB from the mobile web or the native app. (a unique case in Europe with multiple carriers at the same time, for private/non-public transportation). - USA: Sprint & Danal BillToMobile partnered with LevelUp to support in-store purchases (earlier in 2016 Danal sold their US BillToMobile business to Bango) - Japan: KDDI, Docomo and Boku used DCB to reload gift cards of Ueshima Coffee Co. (Japan’s largest coffee house chain) - Sweden: WyWallet allows users of Telia, Tre, Tele2, Telenor, Comviq, Raspberry and Halebop to fund their wallet with DCB

for remote digital and physical goods. - Turkey: NeoMobile’s OneBip and Turkcell used DCB for BiTaksi, Istanbul Ferry Services and the Turkish Football Federation.

Of special note is the pioneering leadership of DCB in Japan. NTT Docomo has championed extending the upper bounds of DCB-physical goods, providing a beacon to carriers globally that visionary, committed leadership is key. DCB-physical in Japan is being successfully supported for apparel/shoes/ accessories, cookware/kitchen, cosmetics/health/beauty,

a fast growing “flea market” that allows users to both buy and sell clothes and goods. Consumers in Japan have DCB post-paid spending limits of

$500-$800 depending on payment performance and age.

The success-knowledge of DCB is currently going through a phase of accelerating expansion thanks to more permissive DCB regulations globally, to evolving DCB tax policy (i.e.: the recent debut of Google Play in India that found a way around a tax barrier), to visionary pioneering leadership at carriers, carrier-partner/suppliers, merchants and others in the ecosystems of DCB.

Leaders from carrier corporate cultures that encourage and reward innovators (based on theory-of-opportunity) help leadership at next-wave/follower carriers where the task of building leadership alignment backing has a vastly greater probability of success when proof-of-concept evidence is demonstrable. However, as leaders of initiatives know, issues with go-to-market planning and execution, through scaling can be countless. A traditional model for helping an industry to advance is via the assistance of industry associations which can help assist with at least common problems (lobbying, awareness driving, advocacy, etc.).

DCB, along with Carrier operated mobile money, are two multi-billion dollar sectors of a rapidly emerging space increasingly being recognized as ‘Carrier Commerce’. Further, these two established sectors (along with now approximately 3 dozen emerging Carrier Commerce sectors) are a quiet giant in helping advance global financial inclusion.

Financial inclusion is a top global imperative of GPFI (Global Partnership for Financial Inclusion) - an inclusive platform for all G20 countries, as well as the U.N. and 100+ donor foundations, bi-lateral & multi-lateral agencies, private donors and investors who have contributed over $31B annually in recent years to help advance financial inclusion to reach the ~2B remaining unbanked globally. The Bill & Melinda Gates Foundation has assisted the non-profit Alliance for Financial Inclusion (AFI) with millions of dollars in funding. A major role of AFI is to help facilitate the cross-pollinating of financial inclusion success-knowledge to policy makers (government, carriers, banks, etc.). Downstream from policy is operational execution financial inclusion strategies and tactics (spanning proactive planning to reacting to time sensitive challenges that arise).

Non-profit FINCCLUDE (Financial Inclusion Now, Carrier Commerce Leading a Ubiquitous Digital Economy) is downstream from AFI, uniquely exclusively serving the Carrier Commerce industry at the intersection of Financial Inclusion by helping to facilitate the cross-pollinating of financial inclusion success-knowledge to operational leaders in Carrier Commerce (when necessary, as a rapid response unit). FINCCLUDE’s growing base of free members (each being a knowledge-cell) in Carrier Commerce are experienced, insightful and passionate about this space, willing to help global stakeholder colleagues by sharing relevant (non-proprietary) success-precedent/knowledge (for no fee or obligation) to help the industry advance at a greater pace, thus helping advance financial inclusion faster.